The Web’s Attic

Shoppers today want flexibility in how, when and where they shop, and many retailers oblige them with a growing range of online and offline options and services. At retailers who have figured out how to execute these offerings well, this has increased customer satisfaction levels and driven up sales.

It also has created a ton of customer buying data. And that, in turn, has created a booming market for data storage technology—a market projected to grow 30% a year for the next five years. “We’re seeing a lot of storage growth, because companies really want the agility to react quickly to changing business,” says Phil Goodwin, a storage technology analyst with Meta Group Inc., Stamford, Conn.

As retailers learn how customers shop in different channels—and how they shop across channels—the whole area of customer data is emerging as an invaluable tool for perfecting multi-channel strategies. Customer relationship management applications, highly segmented marketing campaigns, loyalty programs and customer lifetime value calculations are only a few of the many different kinds of data that retailers are collecting now that they weren’t a few years ago.

That massive build-up of data is also becoming a major challenge for retailers’ back-end storage systems, many of which were not designed to support the kind of multi-channel shopping activity that many merchants are now experiencing. Storage isn’t sexy, but without it, retailers lose out on a gold mine of information.

Data avalanche

Demand from retailers is part of the reason that research and analysis firm Hurwitz Group, Framingham, Mass., projects sales of storage resource management technology to grow a compound annual growth rate of 30% between 2001 and 2005, from $397 million to $1.47 billion.

Much of the data captured by retailers relate to customer buying behavior, showing streams of shopping preferences for individual customers. Retailers mine these data within each selling channel for insight on how to better market products within each selling channel. But to make the most use of the data, retailers need a central storage environment where the data can be combined with data from other channels, including catalog, web and stores.

“This data avalanche has to be centralized and consolidated,” says Liz Thibeault, global manager, retail industry, EMC Corp., Hopkinton, Mass. “There is not a retailer that doesn’t bring up customer data today, and particularly the amount of data coming from online, where it accumulates much faster than offline.” Noting that multi-channel shoppers generate substantially more revenue than single-channel shoppers, retailers recognize a need “for any multi-channel retailer to pull information from all channels,” she says.

The rise of the Internet is what’s behind the rise in data storage needs, analysts say. The Internet has made it possible for retailers to gather extremely detailed information about how their customers shop. And since that information is important to understanding how to relate to customers, it can’t just be analyzed and dumped. It’s all got be stored somewhere. “Web-enabled applications are always hitting servers, and every time you do that, storage is involved,” says Stephen Elliott, research director for storage management technology at Hurwitz Group.

Trends in brick-and-mortar stores are also increasing the importance of storage systems, as retailers move into such developments as self-checkout and self-service kiosks used in several areas, including researching and purchasing products, e-learning programs and job applications. These are trends that will continue, causing data to grow at an increasing rate, says Brian Slaughter, manager of retail industry storage systems for Dell Computer Corp., Austin, Texas, a major provider of storage hardware systems as well as a big user of storage to supports its own online retail operations. “Information will drive retailers’ business more than ever before,” he says.

A tripling in capacity

The demands for storage are growing so rapidly that retailers are taking more than just incremental leaps as they boost their storage capacity. Sears, Roebuck and Co., for example, tripled its data storage capacity earlier this year to 140 terabytes from 45 terabytes. The increase allows Sears to better manage data among several applications, enabling it to more tightly integrate data on customer buying behavior with point-of-sale data and inventory data. “The result is that we can better correlate various data points and improve our decision-making about assortments, promotions, margins and inventory,” says Jonathan Rand, director of merchandise planning and reporting at Hoffmann Estates, Ill.-based Sears.

Effective data storage systems require more than just larger capacity, however, and retailers are beginning to recognize and demand greater interoperability among their storage servers.

If retailers can organize data on an integrated infrastructure of storage hardware and software, experts say, they can reduce the cost of managing information while increasing the amount of data they can manage.

Sorting though the alphabet soup of options, though, can be daunting. For starters there are SANs— storage area networks—that companies use for extensive storage capacity. SANs, which can be networked via the web, tap the power of multiple storage servers. For specifically storing fixed content, such as customer receipts and medical prescriptions, there is content addressed storage, or CAS. Then to make all that data work together, SANs and CAS applications can be combined in automated network storage—or ANS—platforms.

Learning from history

The combination of these technologies in an ANS platform, such as from EMC Corp., can play a key role in maintaining multi-channel retailing strategies. For example, product pricing can be updated on one server and replicated to multiple servers in real time, so that each channel can have instantly updated information. The same advantage in real-time multiple server updates is also used at retailers like Home Depot Inc. in employee training and support systems, which can distribute updates in product specifications to salespeople on the floor as well as to back-office managers.

In web-based retailing, these networked storage systems can be used to update pricing and promotions based on changing customer behavior data. The TimeFinder storage management system from EMC, for instance, enables a retail manager to leverage data-mining analytics based on customer shopping behavior records to make pricing and promotional changes on a copy of a consumer web site. Once the changes are made, they’re instantly synchronized on the actual transactional page. “The consumer doesn’t have to hit a refresh button,” says Thibeault.

At the Bombay Co. Inc., which designs and markets home furnishings on the web and in 422 stores in the U.S. and foreign markets, a new centralized data management strategy that integrates a network-attached storage server into a SAN provides for a central data repository that will scale up to greater storage capacity as Bombay increases business in all of its channels, says Chris Carroll, director of infrastructure. Bombay, based in Fort Worth, Texas, is integrating a network-attached storage server from Dell with a Dell EMC SAN.

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Bombay, which installed its storage management system out of a necessity to consolidate its growing amount of data, expects it to provide opportunities to learn how to better use data for tracking trends and customer shopping behavior, Carroll says. “The more history we collect, the more we’ll learn how to use our storage technology to better use the data,” he says.

One of the additional ways Carroll expects to leverage the new system is to create a product image library, so that Bombay can better manage the images and make sure it’s presenting a consistent view of products across multiple media, including web, print ads and in-store signage. Without that library, he says, Bombay must take a more laborious route of checking how images appear in each medium to assure their consistency.

Expected increases in multi-channel activity will only add to Bombay ‘s reliance on management of back-end storage. “We see a lot of opportunity there to give people faster and better access to information,” Carroll says, adding that Bombay’s storage system will become more important as the company expands both its web and store operations.

Bombay works with several data respositories, but by consolidating the data onto one back-end storage system, it will make it easier for managers to access the particular data they need. “So they can make decisions in a faster pace,” Carroll says.

New era of integration

In a study of enterprise storage systems conducted earlier this year, Meta Group Inc. found that many companies appear to be similar to Bombay in that they need to learn how to best leverage storage technology. Among the study’s findings are that most business organizations do not have enforced storage policies or central storage administration.

“There is a relatively weak understanding of how much storage is being managed, little confidence in current backup/recovery practices, and a general lack of knowledge about emerging storage technologies,” the study says. In the meantime, however, storage technology is evolving to make it more usable.

Storage technology and the product strategies of data storage vendors have been evolving to make storage systems more interoperable among different brands and, at least theoretically, more effective at helping merchants manage data across multiple channels and data points.

Before the surge in online retailing in recent years, and the subsequent rise in multi-channel retailing, there was little if any concern about making storage servers interoperable. For one thing, data storage was cheap, so it usually was not considered a financial burden to simply increase storage where it was needed. And without a need to integrate data among different channels, retailers could just build up their storage capacity in silos to support individual applications.

But while retail strategies and the demand they make on storage have changed, many retailers’ storage systems have not. Many existing retail industry storage systems were installed as long as 10 years ago, when storage servers were not designed for interoperability. “Open standards are definitely ringing a bell for people who have felt trapped for a long time,” says Slaughter of Dell.

The practical result of having a network of storage servers that interoperate, he and others say, is that retailers can mine and analyze data from multiple channels as well as from multiple applications, including customer relationship management and supply chain management systems, to plan promotions and inventory levels to support multiple channels, both separately and as an interrelated group.

Long way to go

“The retail business is tougher than ever, with aggressive competition in both price and assortment. Our challenge is to ensure that customers find the merchandise and service they want in our stores, while eliminating what they don’t want,” says Rand of Sears. He adds that he needs the right data storage system to enable Sears to access and manipulate data in a way that supports its merchandising efforts faster than the competition.

Still, some analysts say the move toward interoperability among different brands of storage servers has a way to go in terms of universal reliability. “No one today really supplies heterogeneous storage management tools,” says Meta Group’s Goodwin. “We’re at a point where storage management is really in its early stages, about the 3rd inning of a 9-inning game.”

Much of the data storage market is the turf of leading vendors Hewlett-Packard Co., IBM Corp., EMC Corp. and Veritas Software Corp. But there are also 100 or more storage technology companies that have cropped up in recent years, though many are expected to disappear in a market shakeup and consolidation, says Elliott of Hurwitz Group.

Innovations

Storage management systems are usually customized for each user, so prices vary widely. For an example of entry-level prices, however, EMC’s Clariion CX400 networked storage system starts at $62,000. The 2-gigabyte system can handle cached data at 680 megabytes per second.

A few start-ups, meanwhile, are attracting the attention of analysts for what appear to be innovative attempts to improve storage management. Two examples, says Elliott, are Campbell, Calif.-based OuterBay Technologies and New York-based NewView Technologies Inc. While OuterBay has a patent pending on improving storage integration with PeopleSoft and Oracle databases, NewView is working on improved integration in Windows-based file management systems.

Elliott and others note that extensive competition among storage vendors is going a long way toward creating more open and flexible storage systems. “That’s good for users,” Goodwin says. With the number of options increasing, retailers should carefully invest in storage systems only where they can find an immediate return, he cautions. “Think strategically and buy tactically,” he says.

paul@verticalwebmedia.com